The Common Reporting Standards (CRS) Dragnet, CBDC Pilots, and Thailand's Foreign Income Tax Law Effective 1st January 2024

This is not financial advice. I am presenting facts, information, and expressing opinions on the state of play...

Expect to hear more about Common Reporting Standards (CRS) in 2024. CRS refers to an existing agreement between banking institutions in multiple different jurisdictions, territories, and countries. According to Organisation For Economic Co-operation and Development (OECD):

The Common Reporting Standard (CRS), developed in response to the G20 request and approved by the OECD Council on 15 July 2014, calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions required to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions.

The Standard consists of the following four key parts: 

• A model Competent Authority Agreement (CAA), providing the international legal framework for the automatic exchange of CRS information;

• The Common Reporting Standard;

• The Commentaries on the CAA and the CRS; and 

• The CRS XML Schema User Guide

Perusing the 174 page OECD implementation handbook for Standard for Automatic Exchange of Financial Information in Tax Matters - one can deduce the pain-staking lengths that this global collaborative financial tracking and reporting instrumental framework has gone to, for maximum catchment and enforcement “cooperation” to have our banks share information transnationally, whilst having governments pressured into writing its directives into domestic law.

My current rudimentary understanding is as follows - CRS has existed since 2014, although the massive amounts of data collected on both businesses and individual transaction history has been amassed, collated, shared, yet not strictly acted upon, yet.

It gives cause for concern, because the global interconnectedness of the CRS reporting system means that if your bank, and by extension, your government, decided to audit you, they can retroactively go back almost 10 years to the inception point of the system in 2014. If that sounds like a tyrannical tool of financial oppression which could be weaponised against persons considered persona non grata by the powers that shouldn’t be, that’s because it is exactly like that.

Amidst all the financial jargon in the aforementioned implementation handbook, a key infographic lays out the guidelines for determining the eligibility criteria in identifying a reporting financial institution.

From the handbook:

A key aspect to implementing the reporting requirements is to ensure the correct scope of financial institutions that are required to collect and report the information. These are defined in the Standard as Reporting Financial Institutions. The CRS contains detailed rules defining Reporting Financial Institutions which are built around a four step test, as shown in Figure 5.

Step 1: Is it an Entity? 117. Only Entities can be Reporting Financial Institutions. The definition of Entity is broad and consists of legal persons and legal arrangements, such as corporations, partnerships, trusts, and foundations. Individuals, including sole proprietorships, are therefore excluded from the definition of Reporting Financial Institutions.

Step 2: Is the Entity in the Participating Jurisdiction? 118. The Standard targets Entities within a Participating Jurisdiction as those that can be most effectively compelled to report the necessary information by that jurisdiction. This is the reporting nexus. 119. The general rule is that Entities resident in a jurisdiction, their branches located in that jurisdiction and branches of foreign Entities that are located in that jurisdiction are included within that jurisdiction’s reporting nexus, while foreign Entities, their foreign branches and foreign branches of domestic Entities are not. This is depicted in Figure 6 where, assuming all the Entities and branches are Reporting Financial Institutions, Participating Jurisdiction A will need to require Entity A, Branch 1 and Branch 3 to report information to its tax authority.

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How does this fit with CBDC & Thailand’s foreign income tax law?

Readers can search ‘CBDC’ within this Substack and find several pieces I have written documenting the pilot of Thailand’s CBDC, the CBDC tracker site, the details on retail vs wholesale and the intermediaries managing the blockchain technology for the platform.

I have also written about Thailand’s populist 10,000 THB “digital wallet handout scheme” which essentially amounts to the government “giving away” this amount of “money” to all Thai nationals aged over 16 years old, effective sometime (Q1 perhaps) in 2024.

Here is a good (22 min) orientation video expressed as an opinion by Benjamin Hart of Integrity Legal, operating within Thailand:

Nathaniel Cajuday, writing for BitPinas, summarised the following:

According to the ‌Atlantic Council data, 131 out of 195 countries around the world have already explored, researched, developed, piloted, or even launched their own CBDC systems as of September 2023. This equated to 98% of ‌global gross domestic product (GDP).

Out of this number, 11 countries have a fully launched CBDC, which means that the country has completed the testing and development stages of its CBDC and is now available for public use. These countries are The Bahamas, Jamaica, Anguilla, Saint Kitts and Nevis, Antigua and Barbuda, Montserrat, Dominica, Saint Lucia, Saint Vincent and the Grenadines, Grenada, and Nigeria. 

Meanwhile, alongside the Philippines, the other countries that have pilot CBDC systems are Australia, Brazil, Canada, China, France, Ghana, India, Jamaica, Japan, Kazakhstan, Laos, Montenegro, Russia, Singapore, South Africa, South Korea, Thailand, Tunisia, UAE, and Uruguay.

According to a tax consultant consultation a friend of mine recently had in seeking advice in Thailand, the Thai government will not back down from implementing the foreign income tax law on 1st January 2024, because:

1. They need to raise funds (taxes) to literally pay for the 10,000 THB digital handout scheme.

2. They have signed up to common reporting standards.

3. They are a chosen country for the early piloting of the CBDC.

The aforementioned tax consultant has recently been in discussions with chambers of commerce for both UK and Singapore.

They are currently negotiating for a caveat to the rules to allow for people to bring in max 10m Thai baht for property purchases, anything over that is charged at 10% tax.

It's possible there will be an announcement of a caveat to exclude retirement income from government pensions and money to used to invest in property (up to 10 million baht).

The whole policy will not be cancelled, as Thailand has already signed up to the common reporting standards (CRS), and they are now obligated to report data on individuals. The reasoning for this is still to pay for the 10,000B incentive to be paid to all Thai people by the new government.

September 2023 was the first data dump from CRS so now Thailand has our bank data/history from other countries, and they can implement the rules.

Any remittance classified as inheritance or loan is fine to bring in without tax being applicable.

Gifts are not taxable, however it's not straightforward, for example if we wanted to gift someone in Thailand X THB, we need a formal gift agreement which is notarised. Without it, it would be perceived as tax avoidance.

Any income while tax resident in Thailand is to be taxed by Thai authorities.

Capital gains are taxable in Thailand, so for example, gold bullion bought in UK and sold, with the money remitted into thailand, would require the individual to declare the source, and the authorities would calculate capital gains and charge for it.

Apps such as Wise/Revolut are not currently under the  Common Reporting Standard (CRS), this means there is no automatic reporting.

Information from Wise is NOT sent to Thailand revenue department every quarter, unlike UK banks which do share the data every quarter. However, if authorities decide to audit you, it's easy for them to track all those remittances as in those cases wise have to share the information.

Using a foreign card here in TH is classed as remittance, if Thai revenue department decided to audit you, they would hold a dim view on any remittances for day to day expenses, which basically means a fine.

What would trigger an audit? During the annual tax return we submit each year, if there is anything that does not look right, they will investigate.

There is an assumption based on risk, a Thai bank will flag the revenue department for any amount more than 2 million baht.

There is no written rule for when revenue will audit, it's random and unpredictable.

The taxes on remitting money into Thailand, are based on our visa status and income in Thailand, and therefore our tax rates. For example, with the progressive tax rates in Thailand, if we are in the 15%, 25% or 30% tax bracket in Thailand, then what we remit gets taxed at the same rate. So if we hit the 30% tax bracket, it means anything we remit gets taxed at 30%.

If I sent BTC from a UK exchange to a Thai crypto exchange, and withdrew to my Thai bank, would I pay 15% capital gains tax instead of the remittance tax rate? Yes, we can pay capital gains instead of income.

Potentially, anyone making crypto gains in the upcoming bull-run, cashing out to their Thai bank account, could pay a small fine instead of the full expected tax rate, perhaps with the guidance and services of a knowledgeable tax consultant.

This is pure speculation on my part - where things could get interesting and especially tyrannical, would be if Thailand’s CBDC comes into fruition through the forced adoption of all existing bank accounts being converted to this system, so that anything considered as a foreign income tax remittance, e.g. any bank transfer made internationally from outside Thailand, to a domestic Thai bank account, could in theory be automatically taxed, algorithmically, as the funds are deposited - hence the programmable nature of central bank digital currencies.

Stay tuned. This is developing. I will add more meat to these dystopian bones as and when I know more…

In the meantime, I wish all Creed Speech readers all the best for 2024. Whatever madness there is in store for us, we will face it head on, together.

Do not worry about what has not yet come to pass. Worrying does not solve anything. Stay calm. Realise and accept the things that are out of your control. Understand and appreciate the things that are in your control, as well as the things you can influence.

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Omnia vincit veritas. Truth conquers all.

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Nicholas Creed is a Bangkok based dissident blogger. All content is free for all readers, with nothing locked in archive that requires a paid subscription. Any support is greatly appreciated.

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